Absa and KCB Green-Lighted to Appoint Savannah Cement Administrator

by | May 13, 2023 | Business, News | 0 comments

 Absa Bank and KCB Bank Kenya have successfully obtained the approval to assign an administrator for Savannah Cement, as a long-standing courtroom dispute finally sees resolution. This follows the High Court’s decision to repeal an injunction that had previously barred the lenders from taking such action.

In December, Savannah Cement had secured a temporary suspension against the appointment of an administrator and the potential seizure of its assets. The cement manufacturer, embroiled in a multimillion-dollar debt crisis, managed to postpone the inevitable as it sought a review of an earlier court decision that favored the banks’ control of its assets.

Savannah Cement raised objections against Justice Wilfrida Okwany, arguing that she should recuse herself from the case after she granted the banks the rights to enforce their securities. Justice Alfred Mabeya, however, declared yesterday that the recusal application had been rendered moot.

Justice Mabeya clarified, “The recusal request lost its relevance following Justice Okwany’s delivery of the ruling, which dismissed the injunction application.”

In May 2022, Savannah Cement disputed the debt claims of over Sh7 billion and Sh3 billion due to KCB Bank and Absa Bank, respectively. Justice Okwany, however, dismissed their application, siding with the banks and affirming the magnitude of the debts owed.

Subsequently, the banks appointed Harveen Gadhoke, an insolvency specialist, as the administrator, following an inter-lenders agreement that vowed to collaborate in the realization of the assets charged to them.

Savannah Cement expressed its intentions to clear the debt and requested the lenders to restructure the loan repayment terms. However, court filings revealed that the company had defaulted on its loan repayment with KCB Bank, accruing an interest of Sh297 million and an additional penalty of Sh13.5 million.

Benson Sande Ndeta, the director of Savannah Cement, confessed that the company had taken out several loans from KCB and Absa, which it was in the process of repaying. He alleged that KCB had increased the amount in violation of the in duplum rule, which restricts banks from charging interest exceeding the principal amount.

Ndeta claimed that KCB threatened to seize the company’s assets when Savannah requested a statement of account to understand the sudden surge in balances. He further alleged that the company was strong-armed into repaying loans of Sh5 billion by both banks to prevent the asset seizure.

Ndeta argued that this planned recovery was an infringement on the company’s rights and an attempt by the banks to unfairly profit at the expense of its shareholders. The company pleaded with the court to halt the seizure, stating that the company would incur irrevocable losses, as the assets at risk included critical machinery and land.

With several contracts in place to supply cement for various government projects, the company warned that these would be automatically terminated if the banks executed their threat. Ndeta also mentioned the company’s ongoing efforts to complete the funding of its clinker project, which would provide the necessary funds to settle the debts.

Justice Okwany, in her ruling, acknowledged that Savannah had admitted to the substantial debt, and emphasized that the banks were the vulnerable parties, as they faced potential losses.

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